This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Craigslist Tsunami That Pummeled Newspapers and Saved Consumers $5 Billion

Stocks in this article: WPO GCI AMZN

Typically, two years after Craigslist entered a metro area, newspapers were forced to lower display advertising rates, along with having already lowered classified ad rates. The drop in revenue only worsened.

Seamans explains that Craig Newmark's creation applied the Google (GOOG) model before Google had become a verb. Google, of course, figured out that it could offer search services for free on one side of its market in order to create as large a pool of users as possible on the other side of the market to appeal to advertisers. Google then charged advertisers for the opportunity to appeal to that gigantic user base.

Craigslist did something similar. By not charging a fee, Craigslist's market platform became exponentially more attractive to both buyers and sellers. "Newspapers," Seamans said, "had historically underpriced on the subscription side because they more than made up for that on the advertising side."

But Craigslist forever knocked over the business model, leaving newspapers scrambling to make up for lost revenue. Eventually, they had to cut employees. Newsrooms shrank and many went out of business, as this map shows.

In retrospect, publishers' mistake was to try to compensate for lower classified advertising by raising subscription prices, and thereby sacrificing the size of their total user base. It's the main reason newspapers were largely hesitant to erect a paywall.

But was it all their fault? Could newspapers have done something different to withstand the disruption caused by Craigslist?

Rick Edmonds, a media business analyst at the Poynter Institute, argues that while new systems rarely emanate from within existing organizations, newspaper publishers tended to downplay Craigslist until it was too late.

"It gets overstated that newspapers should have done this, they should have done that,'" Edmonds said. "That's kind of unrealistic about how innovation and especially disruptive innovation happens -- it doesn't very often come from inside. On the other hand, particularly in that early period, newspaper executives at top corporate level and at the local level were a little bit in denial saying things will get better.''

Only now, with the advent of paywalls, are newspapers beginning to see at least a way toward growth, though that future remains uncertain. Seamans, for one, is an optimist.

''Newspapers have been pretty resilient in the past, and I think they will be in the future," he said. "Newspapers withstood radio and then television, and then local television newscasts, and now it's the Internet. It's premature to say that the death of industry is at hand."

Newspaper employees sure hope so.

Written by Leon Lazaroff in New York

>To contact the writer of this article, click here: LeonLazaroff.>.

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,959.44 +154.64 0.87%
S&P 500 2,078.54 +7.89 0.38%
NASDAQ 4,781.4240 +16.0440 0.34%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs